Class Action Lawsuit Pending Against Ocwen

NCRC senior vice president David Berenbaum said that over the past two years the organization has received over 150 complaints from consumers who say they have experienced problematic servicing practices with Ocwen Federal Bank FSB. The claims resemble those that were recently settled in the Fairbanks Capital Corp. case, said Berenbaum. The violation of RESPA, the Federal Trade Commission act and Fair Housing acts are issues the lawsuit will raise. The complaints range from accelerated foreclosures to allegations that the company may be treating consumers who reside in African-American communities differently than consumers who reside in white areas, the vice president said.

“There has to be justice because so many consumers have been negatively affected by [Ocwen] practices in the past,” said Berenbaum.

NCRC is an organization with over 600 community-based organizations, local municipalities and others committed to responsible and fair lending and equal access to credit, according to Berenbaum.

Although the consumer activist group has worked for some time now with several law firms to bring the case forth, it signed a retainer with Chicago-based Edelman, Combs & Latturner four months ago. The lawsuit will be filed once the “model” plaintiffs are chosen by the law firm, said the vice president.

Berenbaum noted that there are other supporting claims against the West Palm Beach, Flo.-based company besides the consumer complaints NCRC has received.

Lieff Cabraser Heimann & Bernstein, LLP, reported that it filed a consumer protection lawsuit against Ocwen in October for allegedly engaging “in a scheme of unfair, unlawful, and deceptive business practices in its ‘servicing’ of residential mortgage loans in California.” Such practices include failing to credit payments received in a timely fashion; prematurely referring accounts to collections, regardless of the contractual grace periods; and increasing customers’ monthly payment amounts without proper notice and in violation of the terms of the customers’ original mortgage note.

In an e-mailed statement to MortgageDaily.com, Ocwen general counsel Paul Koches said that “NCRC’s attacks on Ocwen are misdirected and irresponsible.”

“NCRC, and the opportunistic plaintiffs’ contingent fee lawyers with whom it is collaborating, should consider the facts — that our rating agencies, investment banks and others familiar with Ocwen have all found — that our servicing business is federally regulated, legally compliant and industry-leading in terms of mutually beneficial resolutions,” added Koches.

Ocwen says it specializes in the management of sub-performing and nonperforming assets, including severely delinquent and labor-intensive mortgage loans, according to its Web site. Apart from being the nation’s largest third-party service provider, the company claims it is also the largest historic purchaser of domestic distressed residential and commercial real estate loan portfolios.

Berenbaum said that NCRC “has a reputation for working with lenders to promote best practices.” He pointed out that when Fairbanks was being investigated by the FTC, and NCRC was planning on filing federal litigation against it, the Utah-based company worked with them to try and resolve problems. The vice president said Fairbanks reviewed each individual complaint out of the hundreds that had been submitted to NCRC and allowed it to help rewrite their best practices standards.

However, Berenbaum said that when they met with Ocwen’s president almost a year ago, “Ocwen’s only interest was trying to diffuse the complaints but not to speak about best practices.”

“They recently adopted a new set of best practices — and frankly they pale in comparison to what other industry leaders have done,” said the vice president.

According to Koches, Ocwen’s president made a special trip to Washington D.C. to meet with NCRC in early 2003, shortly after the group had complained publicly about Ocwen. The president, said Koches, “offered to address any and all issues concerning our servicing practices. That offer was extended on several subsequent occasions. Without explanation, NCRC refused our assistance, providing no facts or information to enable us to respond to any of their supposed issues.”

“Instead, NCRC chose to file complaints against us with HUD and the State of New York on an alleged discrimination grounds,” added Koches. “Those proceedings were dismissed by both agencies in their entirety with no finding of wrongdoing on the part of Ocwen.”

Koches noted that although NCRC alleges that Ocwen engages in abusive servicing practices similar to those settled in the Fairbanks case, Ocwen differs in a number of matters; it employs a consultative approach to customer relations, where the objective is to mutually satisfy resolution of issues; it leads the industry with an 80% delinquency-resolution rate, which means that in 8 out of 10 severely delinquent loans Ocwen is able to achieve resolution and keep borrowers from losing their home to a foreclosure; and that it is regulated by the Office of Thrift Supervision for safety and soundness, and legal compliance matters.

“Unfortunately, the OTS is no FTC,” said Berenbaum. “We don’t believe that Office of Thrift Supervision has done an adequate job of policing Ocwen.”

OTS spokesman Kevin Petrasic said that the regulating agency does not comment on specific institutions, but said that it does “investigate any information we obtain whether from examinations, consumer complaints or any other source, and take supervisory action as appropriate.”

“Lack of a public enforcement action should not be taken to suggest that OTS is not utilizing the numerous informal supervisory tools that we have at our disposal,” he added, noting that the tools include significant contact with institution management and directors if necessary.

“NCRC stands in stark contrast to a host of other fair housing groups who are working together with Ocwen to provide consumer outreach programs and educational information,” said Ocwen’s general counsel.